tv [untitled] May 30, 2011 11:00pm-11:30pm EDT
the. hero or villain a day after supporters of radical in light of the massacre in belgrade a lawyers file an appeal against his extradition to the hague claiming he's more likely to die before a trial even gets started the former bosnian serb general is accused of ordering the deaths of about thirty thousand dollars in the bosnian muslim men and boys at stourbridge needs to in one thousand nine hundred up. u.k. steps of military pressure on the gadhafi regime deploying apache helicopters amid concerns the move could lead to nato casualties the international community's wary of escalating the conflict with host and g eight nations for gadhafi to stand down
and diplomatic efforts from russia and south africa are underway. panic but washington wants to send text messages warning people astable would stream weather and terror attacks a move some analysts say will make population more fearful why not more to form a chip will be placed in every u.s. cell phone meeting users will receive alerts whether they want them or not. and coming up next debate brewing over who will replace dominique strauss kahn at the helm of the international monetary fund crosstalk coming your way.
can. follow him welcome to cross talk i'm peter lavelle issues of relevance and even legitimacy as the jostling continues as to who will succeed the now disgraced dominique strauss kahn at the international monetary fund many still question the usefulness of this global financial institution is the i.m.f. a political tool of the west or an unfortunate necessity. you can. see. to cross-talk the role of the i.m.f. today i'm joined by peter chola in london he is a program manager at the bretton woods project also in london we have daniel ben-ami he is a journalist and author and in cambridge we cross to jeffrey frankel he's a professor of capital formation and growth at the harvard kennedy school ok
gentlemen this was cross talk that means you can jump in anytime one and i very much encourage it but first let's look at some of the issues surrounding this global financial institution. in the wake of the scandalous departure of its former head dominic straws the international monetary fund has been faced with the tough task of self-examination as the money lending parthenon seeks to find a new managing director that was regarding its effectiveness and commitment to internationalism have continued unabated i expect that the next president of the world bank will be an american in the next manager of the i.m.f. will be european broadly construed and that's the same pattern we've had since those instructions were established a pattern so ingrained in the fabric of the supranational giants and so resented by emerging economies that representatives of brazil russia india china and south africa issued a joint statement calling the process of selection and obsolete britain convention and saying that adequate representation of emerging markets and developing members
and the funds management is critical to its legitimacy and effectiveness there are other reasons that should prompt the i.m.f. to revisit its record and possibly revamp some of its policies just ask latin america which suffered a massive debt crisis in the one nine hundred eighty s. or asia which mirrored an economic meltdown and the one nine hundred ninety s. all while the i.m.f. pushed those governments to adopt structural adjustment programs that consisted of draconian economic reforms we've really been looking at this through our problems that our lives and most of our countries have not been subject i.m.f. programs whether these are reasons enough to dismantle the institution and do away with the economic germany of the bretton woods system is still a matter for debate presently the i.m.f. is the only global financial institution with billions of dollars at his disposal that proved quite handy during the recent financial crisis we are one shark away from. if
a national crisis taught us that prevention is better than cure. we cannot afford to forget that lesson regional lending institutions can provide an alternative to the dominance of organizations like the i.m.f. but such spin offs can hardly wield the same political and economic power in the time of crisis nonetheless the world is changing very quickly and it remains to be seen if the i.m.f. in its current form will be able to keep up with the tempo of our ever globalizing world charney for cross party. ok and i think the daniel first thing because because you would have a provocative article a few days ago so i'm going to read one of the provocative sentences and i think it's the first sentence the imus's i missed as function more like a medieval court than a modern organisation danny what do you mean by that. well when i said i enjoyed the article i thought i'd look at it from first principles somebody really believes in democracy how would i look and understand the i.m.f.
and there are some ways in which it's very clearly undemocratic and some ways in which it's not so clear so on the clearest side i mean if i have the western european heads for fifty plus years and the next head is likely to be european as well i mean that's clearly under book i think the fact that america which has less than five percent of the world's population has a veto of the i am if god is clearly and i'm a critic but also in other ways so for example one reason politicians really like the i.m.f. is that it often enables them to. abdicate responsibility for austerity so in other words if they screw up and there are problems with their economy or even if there are problems which are not of their own making rather than take the blame for it they bring in the i.m.f. and they can say well it's the i.m.f. it's imposing austerity it's not really my fault i would really like to do it so
it's a way of bypassing democratic debate and the democratic process ok jeffrey in cambridge would you agree with that i mean i mean just from a purely democratic point of view idea who's got a pretty good point. well i would probably come out on the bottom line the same the same place which is i think it's time for a candidate from a virgin markets but i disagree completely about the reason if you if governance of the i.m.f. were to be completely democratic it will be run like the united nations and it would be much less effect of i think that emerging markets have earned. the right to have one of their own as a magic director of the i.m.f. and it's for a bunch of reasons and none of them are democracy ok here in london where do you come down on that is the is the is the i.m.f. practicing the principles that it claims to be to uphold. well i think on your direct question no the answer is deafening our articles of agreement talk about what it was set up to do and that was to create high incomes to promote trade and
to reduce unemployment and deal with social problems and it's certainly not what it's done it's actually done the opposite but i have to say i do think democracy is important in our institutions and i think there are ways to create democratic institutions in particular countable into tuition's which is an important element of democracy without having a un style one nation one vote though i think you can certainly try that approach but if you look at most of the democracies in the world you look at the u.s. or even the way the european union is set up they operate on ways to have democratic accountability under multiple metrics of doing that in the u.s. you have a congress and the senate in europe you have a european council which has multiple metrics of voting so you don't necessarily only have to have one country one vote like you might have at the u.n. you can have other ways of balancing that using. multiple majorities or double majorities as a way to vote for things that i am out and that's one of the first things we've asked for in this new selection process for a new managing director because if you go strictly on the voting rights that are currently in place at the at the i.m.f.
europeans have are are heavily overrepresented and will be able to install their candidate without any real debate about it and instead we need to have a system which gives a double majority which means to give vote to both economically weighted countries but also to a one country one vote system so that you can balance the competing interests and have much more accountability for the way the i.m.f. operates and i looked at the figures i mean if i'm not a mistake in brazil has less of a list of awaiting voting rights than belgium does i mean how can that be realistic ok a lot of people even say that belgium isn't even a country anymore it's breaking up and brazil is up there is it it's charging out there economically i mean what kind of institutional arms are to stand. first off the governance of the i.m.f. like the united nations it's the members of the. government so you don't blame it on the institution and its members it has been recognized for a long long time that developing countries are emerging markets do not have adequate wait at the i.m.f. and the world bank and there's going to
a lot of words and communiques and rhetoric paid to that there's been a few steps in the right direction one is a creation of the g twenty the governance is moving in the right direction and the shares of the emerging markets are larger than they were before we still have anomalies like you said but the progress is in the right direction the important point let's keep our eye on the ball rather than talking a lot about a lot of principles for the very first time the emerging market countries do have. shot at managing director of the i.m.f. and they won't get it if they don't unify behind a single candidate it's going to be european and it's going to be christine legarde who's perfectly respectable but if they don't unify behind a single candidate it's just not going to happen for elementary political reasons that aren't the markets see or west versus east or anything else ok if peter if i can go to you i think it's going to be any good. the porton point here is not actually about which countries have which votes and what do they represent because
i think if we look at the reality of the situation as many of the candidates that are mentioned as coming from emerging markets are equally problematic in terms of how they would run the fund as you would think of most of europeans pretty quick christine legarde so if you're talking about a candidate who was educated at the university of chicago with a ph d. in in orthodox macroeconomics which as we've seen from the last five years based on theories which are completely flawed then we don't want that kind of person running an i.m.f. which needs to update its thinking and update its policies into the twenty first century and if you look at all the work that's been done across many countries looking at the development process you can see that there are many development trajectories and many development tracks which can use multiple policies and you talk about things like capital controls financial repression industrial policy all right gentlemen i'm going to jump in here daniel i'd like to. so you earlier we heard not only is it not a democratic or this has been debated on this program but what about its entire approach i mean the i.m.f. originated as something very different than what it's trying to do now i mean is it
keeping up with the times and how the global economy is changing. i don't think it's keeping up the times at all no i mean it started in an era of exchange rates and clearly we no longer have fixed exchange rates but i think the more fundamental problem is that it tends to put stability over economic growth so low of course it pays lip service to economic growth. whenever there are problems the kind of immediate response is to try to stabilize things which might sound sensible but what happens in reality often is that fundamental economic problems are on dissolved and they just come in people coming back and back and back so you can see that happen time and time again as i think all international institutions not just the i.m.f. should really be focusing on strong dynamic long term growth that really should be their main aim jeffrey would you want to pick up on that do you agree or disagree with what we just heard here. well i mean to begin with of course choosing
a managing director of the i.m.f. is going to is very different depending on whether you think the institution is that everything it does is all wrong and you want to tear it down or completely change its aims. if question is different therefore the answer is going to be different i but i believe that we've had a period of remarkable growth over the last fifty sixty years i think we've had countries that were very poor become rich and i think this is unprecedented in history and i think part of the reason for it is a global system of governance including free trade and other institutions and i think the i.m.f. has been part of that doesn't mean that i have enough has done everything right but i think it is one that helps and i think if you talked to the eastern european countries and others who have been forced to return for you to jump in here will continue this time out i'm going to break here after a short break we'll continue our discussion on the state party.
which have been. for their take. but that are killing innocent kids or as i call it the place of course and that's never and said. mom a song from the cosco. i think of it every day. of the flyers fire trouble to memorise. us so much so that a long time in the series trying. i was. i was ashamed that i didn't. i was ashamed that i hadn't been a hero why. the legs come along. what i like to be out of knowledge of or. get out believe what i was going on once
or i think. that i was a good soldier. but you know most soldier on the other side and i think i'm just as good. welcome back your ask our computor about to remind you we're talking about the i.m.f. and emerging countries. and. we flew into the break jeffrey made an interesting comment is that we've seen an unprecedented amount of economic growth over the last six years and i guess we all agree minus the great recession but daniel if i can go back to you again. what
a great examples out there with the i.m.f. help countries become rich. well i don't agree with the premise of the question i don't really think it's that the i.m.f. has got just become rich i think it's misleading to look at the past sixty years as a whole i think if you look at the world economy since the early one nine hundred seventy s. it's actually the west and you can see that economic growth rates have tended to slow and also when they have grown they've grown quite often because of extending huge amounts of credit rather than trying to work out how to have real dynamic organic growth i think that is a fundamental problem and what we've had in recent years is a tendency to try to back away from growth so i mislead is not the politicians will say of course i'm in favor of growth but we might damage the environment of course i'm in favor of growth but we want to make people happy of course i'm in favor of growth but the rain equality so what happens is that the dynamic to growth weakens
and he's undermined i think that's what's really come to the fore in the last few years and that's something i really worry about peter if i go to you about also in london he can't will what is syria example out there where the i.m.f. can wave the flag and say we did a good job here with this country or this situation. i think there's very few particular in the last thirty years or thirty five years and that's the problem because where the i.m.f. has been the most heavily involved have been the countries that have been the slackest to the weakest performers over the course of the last couple decades and the ones that have been the strong performers china india brazil are generally the ones who have not followed rigorously the i.m.f. the advice of the world bank's advice and the ones who experimented with their own kinds of economic policy in their own kinds of reforms and then melded a form of some kinds of capitalism with some kinds of state control or state regulation and that's really i think that's the lesson that's the lesson that's been drawn by the commission on growth a number other institutions that have looked at how developing countries have grown now i want to bring that back to what that means for the i.m.f.
leadership right now because we're choosing a leader for the i.m.f. or i should say heads of state of europe are trying to choose their leader on their own and as they're doing that they're not thinking about what we want the i.m.f. to do for the next five or ten years and what we really want the i.m.f. to do and what i think it's added value as an international institution is is that it can be there to serve as a neutral arbiter or an independent voice on economic policies particularly in rich countries the i.m.f. has spent much too long focusing on developing countries and telling them how to run their fiscal and monetary policies and should be spending more time thinking about what's going wrong in the us or in germany or in china and i want to create a global imbalances and the i.m.f. singularly failed to do that in the last ten years it should have been out there saying look what's happening on this financial deregulation agenda is really dangerous you shouldn't be doing it and we need to stop these kind of policies otherwise it's going to blow up in our faces in the i'm a failed to do that because it's been in hock to rich countries and it's been hard to special interest on wall
street and instead we need to have an i.m.f. with an independent head who doesn't have any ties to these kind of special interests and who can be out there doing what's called an i.m.f. speak surveillance but can you really rigorously on the most systemically important countries as they call them meaning the u.s. . germany and japan and china and that's where the i.m.f. needs to be focusing its attention and to do that you need somebody who's not from europe the u.s. tried or germany or japan to leave the institution all right jeffrey in cambridge that's pretty but it's a really amazing indictment there from peter in london do you want to react to some of those comments. well again i actually think we agree on the bottom line that it's time for there are no eight excellent candidates for emerging markets and so that's and there who are. but that's what jeffrey and that's point is it's the just really it's not it's not there who's going to be i think we've got the past i mean it's the it is it's the ideology that's coming out of the i.m.f. because we're with peter said is that these countries are going to receive half a very successful but the i.m.f.
so head to head. let me add to the comment united states over the last decade followed an irresponsible policies of the budget deficit story the bush administration and deregulation and all the rest of it did the i.m.f. say oh that's fine because they were in ad hoc know that i am that's article four with consultation scieno reports criticizing us for that nobody paid any attention nobody cares americans don't care the media don't care that's a matter of power politics it's got nothing to do with who's managing director of the i.m.f. they said the right things but nobody cares our realities in the world and you can't blame them on the i.m.f. i by the way sort of this issue of growth so that's untrue i don't want to learn cia or something about her that he was good deficit go ahead peter didn't i didn't hear the i.m.f. said very little about the american financial deregulation agenda and it was an independent evaluation conducted earlier this year by the i.m.f. so an independent evaluation office which called the i.m.f. staff is susceptible to groupthink because they've been you know just wowed by the
american financial system and their deregulation agenda so i think i mean yes you're half right on on the fiscal side but on the financial deregulation side and i'm a completely mystical jeffrey you want to do so you're talking to me in there the i.m.f. and i mean. that can i don't wish to read it jeffrey so let jeffrey speak and then we'll go back out to daniel go ahead jeffrey. the i.m.f. cannot dictate to the u.s. you go look at the back and look at what the i.m.f. said about housing prices five six years ago but it doesn't matter that's not going to have any effect. there are having an effect in europe now with of course which is a brand new thing or new for the last thirty years but let's talk about the last thirty years among developing countries it is a miracle in history that asians and some other developing countries have gone from poverty to wealth in the last thirty years and i think that's part of the world trade system like i said free trade multilateral institutions of which the i.m.f. is a part it's completely a loser it's almost comical to say let's look at some country that the i.m.f.
was heavily involved in ok not the u.s. because they're not heavily involved some country where they are exercising influence and look for a miracle of growth. and that is like a doctor of course you see doctors around sick patients you can't take a correlation and say all these doctors are all you see the sick patients therefore they cause sickness of course they come in a crisis you can't judge them by saying they're there is seen in the vicinity of crises ok daniel you want to jump in there. well you know if i can come in. first of all i'd completely welcome the rapid growth of china and india and brazil and other countries i'm all in favor of economic growth i would say the i.m.f. is not at all responsible for the growth and that i agree with the other teacher in london that they'd be much more pragmatic but i disagree with peter in london is that i think this whole idea that we have. a free economy free market free trade is simply nonsense i mean whether or not you think that's desirable that does not
describe the reality of the world economy for a very long time those things don't exist is very heavily regulated trade there's very heavy straight spending we do not live in a free market economy so to talk is that as if we do is nonsense even if you believe that we should we shouldn't i think this is the wrong way to look at the question peter do you want to reply that it's already so it's about two thousand of course it's going to have either we move a lot farther in that direction but it's much freer and more often than it was fifty years ago peter go ahead. sure but i think i think the important point that i was trying to make is that it's not about whether it's free you are not free it's about degrees of of management and how countries can take their own domestic situations which are each unique and manage their lives and yes you know for example if you look at all the developments except stories you look at korea you look at taiwan you look at china and japan they've all used our trading system to get where they want and they certainly are not by any means you know free market
countries in any sense of the word and i think that's the important lesson is that the advice the i.m.f. was giving and the economic policies that i.m.f. economists top learned of themselves at the university of chicago and other orthodox economic schools and then we're putting into that into economic policy advice to developing countries are the wrong kind of policies and advice for most countries in the world and that you need to have very very very differential situations for each country and they're not going to and as we all now know economic theory as described by new liberal or the docs economic schools is just floored it doesn't work with the way our real world economic systems work and markets don't but are far from it even though you're wondering that kind of economic theory well no again you could write believe in a higher call milton friedman you might know but no one is pursuing that chicago university does not have a great influence but you give it credit for the people who really influential i really happening is that you've got a greening of the outlook of leaders of international institutions and politicians
where they've taken up i dislike environmental ism to argue that we shouldn't grow or at least we should be very very careful very cautious about growth so the real growth that we have over the last two years which i really welcomed risks being undermined by the alan look and the look is being imposed by the i.m.f. by the world bank and other multilateral institutions it's not the chicago i think the green school we should be worried about i. mean i don't recognize that that is true at the end. and i think right now let's take one of the one of the most important issues that guy in that he's dealing with right now and that's around free movement of capital around the world and so you know ten years ago the i.m.f. or rich members of the i.m.f. let's be fair so rich countries that owned the i.m.f. were trying to push the i.m.f. to amend its articles of agreement to mend the free movement of capital around the world and i was rejected at the time largely because the asian financial crisis hit and everybody said all maybe we should take a break and not think about that right now. and now but it's back again and again
now the i.m.f. is having to think about what do we do about capital flows and do we manage them more carefully or do we let them fall more freely and i think what we're seeing right now is there's a huge debate at the i.m.f. it's going to be a very important topic for the next managing director to take up and to mediate between the frankly the the orthodox economic thinking in europe and the us which is pushing the line that we must have free movement of capital and the more practical and you know. problem oriented thinking that's coming out of brazil and others who are looking i want to i want you to i want to and we're almost out of time gentlemen i want to give geoffrey the last we're going. well i think the capital flows issue i don't disagree with the words coming from but that's not that's yesterday's war the i.m.f. now has moved more in a direction which i agree is is that under certain conditions like results controls on inflows are the ones chile most famously had they can sometimes trolls well
targeted can be can be useful but that's really beside the point i want to conclude on the point that there is a chance if the emerging market countries could get together behind a single candidate already jeffrey we're not you know we've run out of time completely out of time many thanks to my guest today in cambridge and london and thanks to our viewers for watching us here at r.t. the unix time remember cross talk. and. if you want.